12 May 2014

Page | 1 MCI (P) 046/11/2013 Ref. No.: TH2014_0185

Robinson Department Store - ROBINS

1QFY14 net profit down on economic headwinds

THAILAND | COMM | COMPANY RESULTS

BLOOMBERG ROBINS TB │ REUTERS ROBINS.BK

ROBINS reported a slight drop of 2.34% y-y and 3.97% q-q in 1QFY14 net profit to Bt538.92mn as it felt the pinch from economic slowdown.

The 1QFY14 results accounted for 23.97% of our full-year profit target of Bt2,248.70mn for ROBINS. Following a dismal showing in 1QFY14, we believe ROBINS should reap the benefit of additional sales from seven new stores to be opened later this year.

Sluggish economic conditions would remain a major drag on ROBINS’ bottom-line. With no upside left from current trading levels, we retain a ‘NEUTRAL’ stance on ROBINS shares with a FY14 DCF-based target price of Bt49.50/share.

ROBINS reported a slight drop of 2.34% y-y and 3.97% q-q in 1QFY14 net profit to Bt538.92mn as quarterly sales slipped 5.76% y-y and 9.53% q-q due chiefly to a slowdown in domestic consumption, the high base effect of 1QFY13’s sales boosted by closedown sale at its Ratchadapisek branch and sales cannibalization from new stores of its competitors in Chiang Mai and Hat Yai. Management has reiterated its FY14 sales growth guidance of 10% y-y chiefly boosted by the expansion of online distribution channel and its rollout plan for seven new store openings this year with a total capex budget of Bt5.55bn. Of the total, five stores will be in Thailand and the other two stores in Vietnam. How we view this We expect ROBINS’ FY14 net profit growth to decelerate to 13.25% y-y as subdued economic environment would put the brakes on sales growth while expenses tend to climb sharply higher on pre-operating expenses for new store openings, marketing expenses and depreciation charges. ROBINS plans to add seven new stores to its portfolio this year. Investment Action With no upside left from current trading levels, we retain a ‘NEUTRAL’ stance on ROBINS shares with a FY14 DCF-based target price of Bt49.50/share.

Key Financial Summary

FYE Dec FY10 FY11 FY12 FY13 FY14F FY15F

Revenue (Btmn) 14,794 1,453 21,620 24,300 27,570 32,888

NPAT (Btmn) 1,698 1,453 1,658 1,986 2,249 2,603

NPAT, adj. (Btmn) 1,698 1,453 1,645 1,986 2,249 2,603

EPS (Bt) 1.53 1.31 1.49 1.79 2.02 2.34

EPS, adj. (Bt) 1.53 1.31 1.49 1.79 2.02 2.34

P/E (X),adj. 32.7 38.2 33.5 28.0 24.7 21.3

BVPS (Bt) 7.26 8.17 9.77 10.82 12.00 13.39

P/B (X) 6.9 6.1 5.1 4.6 4.2 3.7

DPS (Bt) 0.62 0.65 0.90 0.86 0.97 1.12

Div. Yield (%) 1.2% 1.3% 1.8% 1.7% 1.9% 2.2%

Source: Bloomberg, PSR est.

**Multiples and yields are based on latest closing price

Analyst Phillip Research Team +65 65311240 research@phillip.com.sg

12 May 2014

Page | 2 MCI (P) 046/11/2013 Ref. No.: TH2014_0185

Drop in cost of sales to sales ratio limits slide in 1QFY14 net profit ROBINS reported a slight drop of 2.34% y-y and 3.97% q-q in 1QFY14 net profit to Bt538.92mn as sales revenue slipped 5.76% y-y and 9.53% q-q to Bt5,941.25mn. SSSG shrank by 3.3%. The main culprits behind sales slide were (i) sluggish spending in the face of slowing economic conditions, (ii) the high base effect of 1QFY13’s sales boosted by closedown sale at its Ratchadapisek branch and (iii) sales cannibalization from new stores of its competitors in Chiang Mai and Hat Yai. However, costs of sales as a percentage of total revenue in this period fell dramatically on effective controls on price discounts. Gross profit margin accordingly expanded to 25.1% in this period from 23.7% in the year-earlier period. SG&A expenses also edged higher largely on account of higher depreciation charges and SG&A expenses for new stores opened in FY13. Profits from affiliates were up 15.35% y-y but down 18.82% q-q to Bt92.30mn. Growth at CRC Sport remained strong while Power Buy continued to be dogged by sluggish spending like Robinson Department Store. Despite faltering sales and a steady rise in expenses, a drop in cost of sales to sales ratio however helped limit the slide in 1QFY14 net profit. FY14 net profit outlook unchanged at Bt2,248.70mn The 1QFY14 results accounted for 23.97% of our full-year target for ROBINS. We leave our FY14 net profit outlook for ROBINS unchanged at Bt2,248.70mn. In our view, earnings growth is still possible for ROBINS despite a consumption slowdown as it should reap the benefit of additional sales from new stores to be opened later this year both at home and abroad, a factor that could push sales revenue and rental income up 13.46% and 19.33% y-y respectively. However, earnings growth this year may not be as strong as last year in the face of both political and economic headwinds. We estimate ROBINS will deliver FY14 earnings growth of 13.25% y-y to Bt2,248.70mn but the growth rate marks a deceleration from FY13 as a result of a sharp rise in operating expenses due to its rollout plan for seven new store openings. ‘NEUTRAL’ stance on ROBINS with Bt49.50/share target price The twin effects of prolonged political uncertainty with no signs of light at the end of the tunnel and economic sluggishness have now bitten into ROBINS earnings. With no upside left from current trading levels, we retain a ‘NEUTRAL’ stance on ROBINS shares with a FY14 DCF-based target price of Bt49.50/share.

Robinson Department Store - ROBINS 12 May 2014

Page | 3

ROBINS (Btmn) 1Q14 4Q13 1Q13 y-y+/- q-q+/-

Sales 5,941.25 6,566.96 6,304.62 -5.76% -9.53%

Costs of sales 4,447.17 4,927.00 4,811.58 -7.57% -9.74%

Gross profit 1,494.07 1,639.96 1,493.04 0.07% -8.90%

Rental& Service incom 416.91 358.59 301.93 38.08% 16.26%

Other income 185.32 255.66 172.31 7.55% -27.52%

SG&A 1,448.87 1,611.40 1,290.81 12.25% -10.09%

EBIT 647.43 642.81 676.47 -4.29% 0.72%

Associates & JVs 92.30 113.69 80.02 15.35% -18.82%

Interest expense 1.13 0.00 0.00 NA NA

EBT 738.60 756.50 756.48 -2.36% -2.37%

Taxation 130.16 127.00 134.35 -3.12% 2.49%

Profit After Tax 608.44 629.50 622.14 -2.20% -3.35%

Non-controlling Interest 69.52 68.29 70.25 -1.04% 1.80%

Net profit 538.92 561.21 551.89 -2.35% -3.97%

EPS (Bt) 0.49 0.51 0.50 -2.35% -3.97%

Cost of sales/sales 74.85% 75.03% 76.32% -1.92% -0.23%

SG&A exp/sales 24.39% 24.54% 20.47% 19.11% -0.62%

Gross margin 25.15% 24.97% 23.68% 6.19% 0.70%

Operating profit margin 10.90% 9.79% 10.73% 1.56% 11.33%

Net profit margin 9.07% 8.55% 8.75% 3.62% 6.14%

Balance sheet (Btm)

Assets 18,820.01 18,830.19 17,564.85 7.15% -0.05%

Liabilities 6,204.79 6,817.65 6,082.12 2.02% -8.99%

Paid-up (m shrs) - Par Bt1 1,110.66 1,110.66 1,110.66 0.00% 0.00%

Equities 12,615.22 12,012.54 11,482.73 9.86% 5.02%

Book value/share(Bt) 11.36 10.82 10.34 9.86% 5.02%

Debt/equity (x) 0.49 0.57 0.53 -7.14% -13.34%

Robinson Department Store - ROBINS 12 May 2014

Page | 4

FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F

Revenue 12,842 14,794 17,630 21,620 24,300 27,570 32,888 Cash 3,513 2,384 3,023 1,882 1,371 1,928

EBITDA 1,798 2,585 2,782 3,477 3,742 4,595 5,702 Investments 0 622 1,040 219 800 800

Depreciation & Amortisation 718 785 1,058 1,418 1,848 2,445 Accounts Receivables 636 759 847 865 1,022 1,171

EBIT 1,156 1,867 1,997 2,420 2,324 2,747 3,257 Inventories 941 1,163 1,325 1,667 1,642 1,909

Net Finance (Expense)/Inc 0 0 0 0 0 0 Others 174 175 176 177 178 179

Other i tems 0 0 0 0 0 0 Total current assets 5,264 5,104 6,411 4,810 5,012 5,986

Associates & JVs 253 205 402 358 376 358 PPE 1,887 3,224 4,965 6,752 9,430 11,711

Exceptional i tems 0 0 0 0 0 0 Intangibles 2,604 3,105 3,034 2,812 2,945 2,945

Profit Before Tax 2,120 2,202 2,822 2,682 3,123 3,616 Associates & JVs 1,415 1,620 677 1,102 1,000 1,000

Taxation 343 568 930 456 625 723 Investments 29 29 158 196 190 210

Profit After Tax 1,777 1,634 1,892 2,226 2,499 2,893 Others 1,040 1,183 1,914 3,157 2,253 1,657

Non-control l ing Interest 79 181 234 241 250 290 Total non-current assets 6,975 9,161 10,749 14,020 15,818 17,523

Net Income, reported 1,698 1,453 1,658 1,986 2,249 2,603 Total Assets 10,608 12,238 14,265 17,160 18,830 20,830 23,510

Net Income, adj. 1,013 1,698 1,453 1,645 1,986 2,249 2,603 Short term loans 0 0 0 0 0 0

Accounts Payables 3,858 4,794 5,947 6,484 7,164 8,253

Others 188 271 201 145 100 110

FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F Total current liabilities 4,046 5,064 6,147 6,629 7,264 8,363

Long term loans 0 0 0 0 0 0

EPS, reported 1.53 1.31 1.49 1.79 2.02 2.34 Others 129 131 157 188 243 281

EPS, adj. 1.53 1.31 1.49 1.79 2.02 2.34 Total non-current liabilities 129 131 157 188 243 281

DPS 0.62 0.65 0.90 0.86 0.97 1.12 Non-control l ing interest 188 331 520 670 820 970

BVPS 7.26 8.17 9.77 10.82 12.00 13.39 Shareholder Equity 6,797 8,064 9,070 10,856 12,013 13,323 14,866

FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F

CFO P/E (X), adj.** 32.7 38.2 33.5 28.0 24.7 21.3

PBT 2,129 2,202 2,815 2,682 3,123 3,616 P/B (X), adj.** 6.9 6.1 5.1 4.6 4.2 3.7

Adjustments (1) 544 467 1,011 1,483 2,076 EV/EBITDA (X), adj. #NAME? 16.1 20.4 13.7 11.8 9.4

WC changes (26) 260 484 (4) 691 711 Dividend Yield (%) 1.2% 1.3% 1.8% 1.7% 1.9% 2.2%

Cash generated from ops 2,102 3,006 3,765 3,690 5,298 6,404 Growth & Margins (%)

Others 279 486 586 500 1,324 1,601 Growth

Cashflow from ops 1,823 2,520 3,179 3,190 3,973 4,803 Revenue 15.2% 19.2% 22.6% 12.4% 13.5% 19.3%

CFI EBITDA 43.8% 7.6% 25.0% 7.6% 22.8% 24.1%

CAPEX, net (402) (2,411) (3,051) (3,275) (4,871) (4,490) EBIT 61.5% 7.0% 21.2% -4.0% 18.2% 18.6%

Others 409 (625) 1,288 35 1,426 1,421 Net Income, adj. 67.6% -14.4% 13.2% 20.7% 13.3% 15.7%

Cashflow from investments 7 (3,036) (1,762) (3,241) (3,445) (3,069) Margins

CFF EBITDA margin 17.5% 15.8% 16.1% 15.4% 16.7% 17.3%

Share i ssuance 0 0 0 0 0 0 EBIT margin 12.6% 11.3% 11.2% 9.6% 10.0% 9.9%

Loans , net of repayments 0 0 0 0 0 0 Net Profi t Margin 12.0% 9.3% 8.8% 9.2% 9.1% 8.8%

Dividends (487) (725) (778) (1,090) (1,039) (1,177) Key Ratios

Others 53 112 0 0 0 0 ROE (%) 22.9% 17.0% 16.6% 17.4% 17.8% 18.5%

Cashflow from financing (434) (613) (778) (1,090) (1,039) (1,177) ROA (%) 14.9% 11.0% 10.6% 11.0% 11.3% 11.7%

Net change in cash 1,396 (1,129) 639 (1,141) (511) 557

Effects of exchange rates 0 0 0 0 0 0 Net Debt/(Cash) (3,513) (2,384) (3,023) (1,882) (1,371) (1,928)

CCE, end 3,513 2,384 3,023 1,882 1,371 1,928 Net Gearing (X) 0.05 0.20 0.19 0.26 0.29 0.29

**Based on latest closing price

Source: Company Data, PSR est

Balance Sheet (Btmn)

Per share data (Bt)

Cashflow Statements (Btmn) Valuation Ratios

Income Statement (Btmn)

Robinson Department Store - ROBINS 12 May 2014

Page | 5

Total Returns Recommendation Rating> +20% Buy 1+5% to +20% Accumulate 2-5% to +5% Neutra l 3-5% to -20% Reduce 4<-20% Sel l 5

We do not base our recommendations entirely on the above quanti tative return

bands . We cons ider qual i tative factors l ike (but not l imited to) a s tock's ri sk

reward profi le, market sentiment, recent rate of share price appreciation,

presence or absence of s tock price catalysts , and speculative undertones

surrounding the s tock, before making our fina l recommendation

Ratings History

PSR Rating System

Remarks

12345

Source: Bloomberg, PSR

0.00

40.00

80.00

120.00

De

c-12

Ma

r-13

Jun

-13

Se

p-1

3

De

c-13

Ma

r-14

Jun

-14

Se

p-1

4

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Market Price

Target Price

Robinson Department Store - ROBINS 12 May 2014

Page | 6

Industry Group Name Sector Name Sector Index

Agro & Food Industry Agribusiness AGRI

[AGRO] Food & Beverage FOOD

Consumer Products Fashion FASHION

[CONSUMP] Home & Office Products HOME

Personal Products & Phamaceuticals PERSON

Financials Banking BANK

[FINCIAL] Finance & Securities FIN

Insurance INSUR

Industrials Automotive AUTO

[INDUS] Industrail Materials & Machinery IMM

Packaging PKG

Paper & Printing Materials PAPER

Petrochemicals & Chemicals PETRO

Steel STEEL

Property & Construction Construction Materials CONMAT

[PROPCON] Construction Services CONS

Property Development PROP

Property Fund & REITs FP&REIT

Resources Energy & Utilities ENERG

[RESOURC] Mining MINE

Services Commerce COMM

[SERVICE] Media & Publishing MEDIA

Health Care Services HELTH

Tourism & Leisure TOURISM

Professionsl Services PROF

Transportation & Logistics TRANS

Technology Electronic Components ETRON

[TECH] Information & Communication Technology ICT

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We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation

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Total ReturnTotal ReturnTotal ReturnTotal Return RecommendationRecommendationRecommendationRecommendation RatingRatingRatingRating RemarksRemarksRemarksRemarks >+20%>+20%>+20%>+20% BuyBuyBuyBuy 1111 >20% upside from the current price>20% upside from the current price>20% upside from the current price>20% upside from the current price

+5% to +20%+5% to +20%+5% to +20%+5% to +20% AccumulateAccumulateAccumulateAccumulate 2222 +5% to +20%upside from the curren+5% to +20%upside from the curren+5% to +20%upside from the curren+5% to +20%upside from the current pricet pricet pricet price ----5% to +5%5% to +5%5% to +5%5% to +5% NeutralNeutralNeutralNeutral 3333 Trade within ± 5% from the current priceTrade within ± 5% from the current priceTrade within ± 5% from the current priceTrade within ± 5% from the current price ----5% to 5% to 5% to 5% to ----20%20%20%20% ReduceReduceReduceReduce 4444 ----5% to 5% to 5% to 5% to ----20% downside from the current price20% downside from the current price20% downside from the current price20% downside from the current price

<<<<----20%20%20%20% SellSellSellSell 5555 >20%downside from the current price>20%downside from the current price>20%downside from the current price>20%downside from the current price

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